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2013-041 Approving an Economic Incentive Agreement between the Paris Economic Development Corporation and JS Baking, LLCRESOLUTION NO. 201 3 -041 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PARIS, TEXAS, APPROVING AN ECONOMIC INCENTIVE AGREEMENT BETWEEN THE PARIS ECONOMIC DEVELOPMENT CORPORATION AND THE JAMES SKINNER BAKING CO., MAKING OTHER FINDINGS AND PROVISIONS RELATED TO THE SUBJECT; AND DECLARING AN EFFECTIVE DATE. WHEREAS, on December 10, 2013, the Board of the Paris Economic Development Corporation approved a $1,179,000.00 Economic Incentive Agreement with The James Skinner Baking Co., a Nebraska Corporation (hereinafter called "Skinner ") related to the Twenty -Five Million Dollar ($25,000,000.00) capital investment Skinner is making in the former Sara Lee Property and Baking Facility; and, WHEREAS, pursuant to City and PEDC policy, the City Council shall review all economic incentive agreements involving an expenditure in excess of $400,000.00; and WHEREAS, the City Council hereby finds that Skinner has made a significant capital investment in the community, adding to the tax base and creating many new jobs, therefore the City Council finds that it is in the best interest of the City and its citizens to approve the PEDC Economic Incentive Agreement with Skinner, attached hereto as Exhibit "A ", for the new Skinner Bakery Facility.. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PARIS, TEXAS: Section 1. That the findings set out in the preamble of this resolution are hereby in all things approved. Section 2. That the Economic Incentive Agreement between the Paris Economic Development Corporation and The James Skinner Baking Co., a substantial copy of which is attached hereto as Exhibit "A" is hereby approved. PASSED AND ADOPTED this 16th day of December, 2013. ATTEST: IOLO anice Ellis, City Clerk APPROVED AS TO FORM: W. Kent McIlyar, City Attorney ECONOMIC INCENTIVEAGREEMENT STATE OF TEXAS KNOW ALL MEN BY THESE PRESENTS: COUNTY OF LAMAR THAT, the PARIS ECONOMIC DEVELOPMENT CORPORATION, a Non -Profit Texas Corporation, acting by and through its Board of Directors (hereinafter called "Paris EDC "), and The James Skinner Baking Co., a Nebraska S. Corporation(hereinafter called "Skinner "), do hereby contract and agree with each other within this Agreement (herein so called) as follows: WITNESSETH: WHEREAS, the Paris EDC a local Economic Development Corporation organized under the Texas Development Corporation Act of 1979, codified as Chapters 501 and 504 of the Texas Local Government Code (hereinafter, the "Act "), exists for the purpose of encouraging and assisting qualified service and manufacturing entities in the creation and retention of facilities and jobs in the Paris, Texas, area; and WHEREAS, Skinner is a baked goods manufacturing limited liability company, which is duly existing and authorized to do business in its state of creation and in the State of Texas; and WHEREAS, Skinner has made or has committed to make a TWENTY -FIVE MILLION DOLLAR ($25,000,000.00) capital investment in the former Sara Lee property and facility located at 2020 NW 19th, Paris, Texas (hereinafter "Property" or "Facility ") over the next five (5) years (2013 -2018) consisting of a combination of (1) $5,600,000 for facility acquisition, (2) $19,400,000 for constructing new infrastructure and facility improvements, and purchasing and installing new equipment, and (3)creating new jobs and training employees to manufacture Skinner baked goods (hereinafter the "Project "); and WHEREAS, in consideration of Skinner's capital investment in the Project, the Paris EDC has agreed to provide certain financial incentives to Skinner as set forth in this Agreement; and WHEREAS, Skinner will be making significant improvements to its Property and will be hiring 393 new employees and staff to work at the Property upon completion of construction of its new infrastructure and facility improvements and the purchase and installation of its new equipment; and WHEREAS, the Paris EDC Board, at a special called meeting on December 3, 2012,authorized an economic incentive offer of ONE MILLION ONE HUNDRED SEVENTY NINE THOUSAND DOLLARS ($1,179,000.00) to Skinner as incentive for Skinner's TWENTY FIVE MILLION DOLLAR ($25,000,000.00) Capital Investment in the Projectand393new full -time equivalent jobs at the Facility; and 1 WHEREAS, the Board of Directors of Paris EDC has determined that it is in the best interest of the City of Paris, Texas community and the local economy that Paris EDC provide these economic incentives to Skinner in order to secure the company's commitment to this Project in Paris, Texas, and the resulting new jobs and capital investment. NOW, THEREFORE, in consideration of the covenants, promises, and conditions set forth herein, the Paris EDC and Skinner agree as follows: I. TERM This Agreement shall be effective upon the date last executed by the Parties hereto and shall remain in force for a term of five (5) years from the effective date. II. REPRESENTATIONS AND OBLIGATIONS OF THE PARTIES A. Skinner's Duties, Obligations and Representations: Skinner shall acquire, operate and maintain the former Sara Lee Bakery Property and Facility located at 2020 NW 19th, Paris, Texas (the "Facility ") throughout the term of this Agreement. 2. Skinner shall make capital investment in the Property, Plant and Equipment in an amount not less than $25,000,000over the five -year term of this Agreement in accordance with the Description of Capital Investment attached hereto and incorporated herein as Exhibit "A ". Skinner's investment in 2012 and 2013, prior to the effective date of this Agreement, will be included in the total capital investment. 3. Skinner shall hire and employ 393 fall -time equivalent (FTE) employees to work at theFacility in accordance with the schedule set out below: F 2013 20 ion 2016 16171, Vow Job Creation 1 135 199 59 - - 393 Training $67,500 $99,500 $29,500 - - $196,500 Reimbursement (2) Job Creation Payout 3 - 337,500 497,500 147,500 - $982,500 Total. $67,500 $437,000 $527,000 $147,500 - 000 _$i,17%000 Notes: (1) These are Skinner's best estimates. Actual job creation figures will be based on implementation of new product lines tied to customer demand, sales and contracts. Regardless, Skinner is committed to creating 393 jobs over the five years of this agreement. (2) Calculated at $500 per new job created. Payable upon invoice and documentation. (3) Calculated at $2,500 per new job created as of Skinner's year -end FTE count, payable annually after January 1St of the next year with approved documentation. F 4. Skinner shall create and maintain the 393 FTE jobs referenced above at the Facility throughout the term of this Agreement. The actual timeline for job creation may be slightly different ( + / -) from the estimates in the chart above. Skinner will be paid only for the FTE jobs created during the previous 12 -month period, not to exceed 393 over the term of this Agreement. 5. Skinner shall train the new employees in the Skinner baked goods product lines, to work in Skinner's high- performance organization and high - performance work systems, and to maximize productivity and cost competitiveness at the Facility. 6. Skinner shall continue to operate a fail -scale bakery plant with a diversified product line at the Facility throughout the term of this Agreement. 7. Skinner shall provide annual compliance statements to Paris EDC on or before January 7a' of each year of this Agreement, in a form acceptable to Paris EDC, that verifies that Skinner is in fall compliance with all terms and conditions of this Agreement. The first compliance report from Skinner will be due on or before January 7, 2014. 8. Skinner shall provide year -end employment and payroll reports to Paris EDC and a copy of the Texas Workforce Commission's Quarterly Employment Reports, which verifies that Skinner has retained the minimum number of FTE jobs at the Facility on the same time frame. B. Skinner Represents to Paris EDC the following: Skinner has filed all necessary plats, site plans and building permit applications with the City of Paris, Texas ( "City ") to construct and complete the first stage of improvements and modifications to the Facility. Skinner has pulled all necessary building permits, and complied with all City ordinances, building and development codes in making the improvements to the Facility, and Skinner agrees to follow this procedure for the remaining phases of capital improvements to the Facility. 2. Skinner agrees to allow any designated representative of Paris EDC onto the Property and inside the Plant Facility at any time throughout the term of this Agreement, or any extension thereof, upon forty -eight (48) hours' notice, to verify that the capital improvements to the Facility have been completed. 3. For purposes of this Agreement, a full -time equivalent job ( "FTE ") shall mean employment by Skinner of one or more persons to perform a single job, either individually or between them, (i) to work at the Facility in its high performance organization/work system, and (ii) for a period of time which, in the aggregate, totals forty (40) working hours during a seven -day work week, or (iii) two- thousand eighty (2,080) hours during a calendar year, adjusted for use of employee paid leave. The calculation of total FTEs eligible for reimbursement shall be total full -time employees on official company payroll records, including benefits and with an average of 3 40 hours/week over the preceding 12- months from calculation date, defined as "Skinner" fiscal year end date. The remaining hours worked by part-time employees during the Fiscal Year may then be combined and divided by 52 weeks, then divided by 40 hours to determine the additional number of full -time equivalent jobs eligible for reimbursement. In no event will the total economic incentive provided by this Agreement exceed ONE MILLION ONE HUNDRED SEVENTY NINE THOUSAND DOLLARS ($1,179,000.00). 4. Confirmation of Skinner's year ending FTE count shall be provided to the Paris EDC no later than January 7a` of each year. Reconciliation and any audit procedures from the Paris EDC shall be communicated and passed to Skinner by January2ls' of each year. Reconciliation and response shall be provided by Skinner by January 28'h of each year. Payments shall be made via physical check, electronic draft or wire within thirty (30) days of receiving Skinner's final documentation, in accordance with the agreement. Validation by Paris EDC will be based on a review of records from the Texas Workforce Commission (TWC) and certified payroll records provided by Skinner. Skinner agrees to provide any other personnel records, payroll records, documents, reports or affidavits deemed necessary by Paris EDC to verify minimum employment/retention requirements at the Facility. Skinner shall provide these additional verification documents to Paris EDC within five (5) business days following request from Paris EDC. Any delay in providing the verification documents to Paris EDC may cause a delay in issuance of economic incentive payment. 6. Skinner will pay all taxes when due, including, but not limited to: federal employment, payroll and Medicare taxes on its employees; all state and local sales and use taxes and excise and franchise taxes; and all ad valorem taxes on all real and personal property. In the event Skinner should fail to pay any of the lawfully imposed taxes or fees referred to above when due, plus any penalties, interest, costs or attorney's fees lawfully imposed, Skinner shall be considered in default of this Agreement and Paris EDC may terminate this Agreement and pursue recovery of any and all economic incentives provided to Skinner under this Agreement plus any other rights it may have in equity or under the law. 7. Skinner agrees not to employ undocumented workers at the Facility. Should Skinner be convicted of a violation under 8 U.S.C. Section 1324a(f) regarding the employment of undocumented workers during the term of this Agreement, it shall be deemed in default and subject to termination of Agreement and reimbursement of Economic Incentive funds as provided herein. Skinner agrees to operate and maintain the Facility as described herein for the five (5) year term of this Agreement. If Skinner fails to maintain the Facility as set forth in this Agreement, then Skinner shall be considered in default of this Agreement. If Skinner is unable to cure this default within thirty (30) days following receipt of written notice of default from Paris EDC, then Skinner shall reimburse and repay Paris EDC all funds paid to Skinner under this Agreement within sixty (60) days. 4 9. Throughout the term of this Agreement and any extensions thereof, Skinner agrees to provide copies of its certified financial audit statements to Paris EDC within 120days of Skinner's fiscal year end. Upon request from Paris EDC and three business days advance notice, Skinner shall make its summarized financial records and books open for inspection and review by Paris EDC or Paris EDC's authorized accountants or agents. "Summarized financial records" shall be defined as specific figures or financial ratios that are non - representative of a full profit and loss statement. Balance sheet and cash flow statements may be provided upon request. 10. Indemnification. Skinner hereby agrees to indemnify, defend and hold the Paris EDC, its elected officials, officers and employees harmless from all suits, actions or claims of any character, name and description brought for or on account of any injuries or damages received or sustained by any person, persons or property on account of the operations at the Facility, or on account of any negligent act or omission or intentional wrongful act of Skinner, its agents, employees or subcontractors in the performing the work called for in this Agreement; or on account of Skinner's failure to provide the necessary safety equipment for the Project. Skinner agrees to pay in full any judgment, arbitration award or mediated settlement, including court costs, arbitration/mediation costs and attorney's fees which may be obtained against the Paris EDC, its elected officials, officers or employees growing out of such injury or damage. C. Paris Economic Development Corporation's Duties, Obligations and Representations: Paris EDC agrees to paythe above - described incentive payment of $1,179,000.00 to Skinner in accordance with the Incentive Metricsand Timeline set forth in Article 11, paragraph A.3., upon final approval of this Agreement by the Paris EDC Board of Directors and the Paris City Council and execution of Agreement by all parties. 2. Paris EDC has completed its assistance to Skinner in advocating a tax abatement agreement for the Facility with the City of Paris, Texas, with Lamar County, Texas and with the Paris Junior College. The tax abatement agreement is based upon Skinner's capital investment and new job creation at the Facility as described therein. The tax abatement agreements granted is in conformity with the approved Tax Abatement Guidelines and Criteria of the above named taxing jurisdictions. 3. Paris EDC and Skinner previously entered into a $2,000,000.00 bridge loan agreement to assist Skinner with financing the acquisition of the Properly and Facility, which Skinner agrees to timely repay in full in accordance with the terms of the loan documents. 4. Convene and facilitate additional State and Federal incentives for which Skinner's Project may qualify, including, but not limited to Skill Training funds through the Texas Workforce Commission; Texas Enterprise Fund award from the Texas Governor's Office; Financial Assistance through the Texas Economic Development Bank, Enterprise Zone Designation, and Federal New Market Tax Credits. 5 III. EVENTS OF DEFAULT AND REMEDIES A. Events of Default — Skinner shall be in default of this Agreement if it: 1. Fails to complete its $25,000,000.00capital investment in the Facility by the end of this Agreement. 2. Fails to employ and maintain 393fu11 -time equivalent employees at the Facility as provided for in this Agreement or any extensions thereof. 3. Fails to maintain and operate the Facility during the term of this Agreement or any extensions thereof. 4. Fails to comply with all terms and conditions of this Agreement. 5. Fails to timely submit annual compliance reports to Parrs EDC as provided in this Agreement. 6. Makes any false representations or warranties to Paris EDC to induce this economic incentive agreement. B. Remedies - Upon the occurrence of any of the above Events of Default, which shall remain uncured for thirty (30) days after written notice from Paris EDC to Skinner describing the default, Paris EDC shall have the right to: 1. Suspend and refuse to pay to Skinner any unfunded portions of the Economic Incentives referenced in this Agreement. 2. Sue for reimbursement and/or repayment of all Economic Incentive payments paid by Paris EDC to Skinner pursuant to this Agreement, plus interest, costs and attorney's fees. 1 Suspend as of the tax year in which the Event of Default occurs, all tax abatements granted to Skinner which are still in force and effect, so that Skinner will be required to pay ad valorem taxes at the market value of the improvements with respect to which taxes have been abated for the year in which the Event of Default occurs and all future years. 4. Under no circumstance, shall any default event, or remedy have legal, or consequently, financial, implications to the ownership of Skinner beyond the legal responsibilities designated by the corporation and LLC structure. James G. Skinner is held harmless as an individual. C. Dispute Mediation Notwithstanding the foregoing provisions to the contrary, the parties hereto agree to mediate any disputes they have against one another before filing a lawsuit. The parties will attempt to agree on a professional attorney /mediator based in or willing to conduct the mediation in Paris, Texas, but if this is not possible, the parties will engage an attorney /mediator from another city located within one hundred thirty (130) miles from the City of Paris, Texas. Each party agrees to mediate in good faith to attempt to resolve any dispute hereunder, to pay an undivided one -half of the mediation costs, and each party's own attorneys fees; and to bring an authorized representative of the party to the mediation having settlement authority; provided, however, that any settlement which requires payment to be made by Paris EDC is subject to formal approval of the payment at the next available meeting of the Board of Directors of Paris EDC. IV. ADDITIONAL REPRESENTATIONS AND WARRANTIES: Skinner hereby represents and warrants to Paris EDC that the following representations are true and correct as of the date of execution hereof and will continue to be true and correct throughout the term of this Agreement: A. Skinner is duly organized, validly existing and in good standing under the laws of the State of Nebraska, and is duly qualified to do business in the State of Texas, as a foreign corporation, and has all corporate power and authority to carry on its business as presently conducted in Texas. B. Skinner warrants and represents that it has the authority to enter into and to perform this Agreement, and that the person signing this Agreement on behalf of Skinner is duly authorized to do so by the Managers of the limited liability corporation of The James Skinner Baking Co., and by any authority needed by its parent corporation or by other corporate authority under which it is organized; and Skinner shall deliver to Paris EDC on the effective date of this Agreement, a properly executed and lawful corporate resolution authorizing the execution, delivery and performance of this Agreement, together with an incumbency certificate identifying its executive officers and the officers signing the documents. C. Skinner has received at this time all necessary rights, licenses, leases, permits and other evidences of authority to conduct and carry on its business in the State of Texas in accordance with the representations it has made to Paris EDC herein. D. Skinner is aware of the statutory limitations upon Paris EDC in entering into this Incentive Agreement with it, and is also aware of the use required by law to be made by Skinner of the funds paid hereunder by Paris EDC pursuant to the provisions of the Texas Economic Development Corporation Act, Chapters 501 and 504 of the TEX. LOC. GOVT CODE. Skinner further acknowledges and agrees that the funds provided to them hereunder as an economic incentive for creating new jobs and investing its capital in the City of Paris, Lamar County, Texas shall be utilized solely for the purposes authorized under the Texas Statute just cited and the terms of this Agreement. If an audit should ever determine that the funds were not utilized by Skinner for these purposes, such 7 determination shall constitute a default under this Agreement, thereby entitling Paris EDC to exercise all of its remedies under this Agreement and provided to Paris EDC by law. In this regard, Skinner shall provide to Paris EDC within thirty (30) days after request from Paris EDC, their most recent annual certified financial audit statement and summarized financial records that Paris EDC shall require to confirm the uses of funds by Skinner and to verify the terms and provisions of this Agreement. E. Skinner represents that it is not involved in any bankruptcy proceedings at this time, and that it has not filed a petition in bankruptcy, nor are any such proceedings contemplated by them at this time. If Skinner shall become the subject of voluntary or involuntary bankruptcy proceedings during the term of this agreement, the same shall constitute an event of default under this Agreement and under any tax abatement agreements then in force and effect. In such event, no further incentive funds to be advanced (if any), by Paris EDC under this Agreement shall be advanced, and any obligations of Skinner to repay incentive funds already advanced to it by Paris EDC under the provisions herein shall be paid to Paris EDC within thirty (30) days after demand from Paris EDC. V. GENERAL PROVISIONS A. This Agreement sets forth the entire understanding between the parties, and any other understandings or agreements pertaining to the subject matters of this Agreement shall be superseded by this Agreement upon the date of execution hereof None of the terms of this Agreement shall be waived, discharged, altered or modified in any respect, except by an agreement in writing signed by both parties and specifically referring to this Agreement. This Agreement is performable in Lamar County, Texas, and shall be governed by, construed and enforced in accordance with the laws of the State of Texas. The provisions of this Agreement shall apply to, bind and inure to the benefit of Paris EDC and Skinner and their respective successors, and permitted assigns, if any. B. The terms and conditions of this Agreement are binding upon the successors and assigns of all parties hereto. Neither this Agreement, nor any interest therein, shall be assigned by Skinner without the prior written consent of Paris EDC Board of Directors. C. Venue for any actions arising under this Agreement shall lie exclusively in the courts of Lamar County, Texas, for any state court action, and in the U.S. District Court for the Eastern District of Texas for any Federal Court action. D. All representations, warranties, covenants and agreements of the parties, as well as any rights and benefits of the parties, pertaining to the transaction contemplated hereby shall survive the expiration of this Agreement. 8 E. Any notices required to be given hereunder shall be in writing and shall be deemed to be duly delivered by mailing the same postage prepaid, by certified mail, return receipt requested (or by overnight delivery service), to the parties at the addresses shown beneath their signatures to this Agreement. Addresses may be changed by a party only by giving written notice of such change to all other parties in accordance with this paragraph at least five (5) days in advance of delivering the notice by mail, and at least one (1) day in advance of delivering the notice by fax or e -mail. EXECUTED on the /� —day of VP(� ��n� , 2013 (herein called the "Effective Date" of this Agreement). AT PARIS ECONOMIC DEVELOPMENT CORPORATION By. - Rebecca Clifford, P s VDC Bo hairman 1125 Bonham St., P , TX 754 (903) 784 -6964 parisedc@paristexasusa.com Paris EDC Secretary- Treasurer ACKNOWLEDGMENTS STATE OF TEXAS COUNTY OF LAMAR BEFORE 1M , �-nt'he undersigned authority, on this day personally appeared REb e e� � ( 1747 rct , Chairman of the Paris Economic Development Corporation, Paris, Texas, known to me to be the person whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed and in the capacity therein stated. ``Da GIVEN UNDER MY HAND AND SEAL OF OFFICE, this `Lq ^day of 2013. AY P4'He iuIARTHANNE SIVETHEN Notary Public ., STATE OF TEXAS '� or My Comm. Exp. August 20, 2015 9 TINE JAMES SKINNER BAKING CO. A NEBRASKA S. CORPORATION ( "Ski ") Y: �er✓sur�-O ie Keaton, President and CEO Address: 4651 F Street, Omaha, NE 68117 Phone: 402-609-4883 ATTEST: Name, Title: ACKNOWLEDGMENTS STATE OF NEBRASKA COUNTY OF BEFORE ME, the undersigned authority, on this day personally appeared, s 1: �u l �.. I ie- eqt& -\. of The James Skinner Baking Co., a Nebraska S. Corporation, known to me to be the person whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, as the act of said company and in the capacity therein stated. GIVEN UNDER. MY HAND AND SEAL OF OFFICE, this-3 day of'-- f — , =Wn 10 EXHIBIT A James Skinner ]Bakin 0. -- Paris l< xpansian Capital Investment Capital Investment 2012 2013 2014 2015 2016 2017 Total Site Acquisition $5,600,000 - - - - - $5,600,000 Building Pre - $1,940,000 $600,000 - - 2,540,000 Sweet Dough - 745,000 - - - - 745,000 Croissant - 1,876,000 500,000 - - - 2,376,000 Fruit Integration - - 300,000 - - - 300,000 Frozen Dough - 39,000 800,000 - - - 839,000 Pound Cake - - - $800,000 - - 800,000 Snack Cake - - - 800,000 - - 800,000 Clamshell - - - - $1,000,000 - 1,000,000 Muffin Line Installation - - - 4,000,000 - - 4,000,000 On-Going Capital hn rovements - - - 1,000,000 2,500,000 $2,500,000 6,000,000 Total $5,600,000 1 $4,600,000 1 $2,200,000_1 $6,600,000 1 $3,500,000 1 $2,500,000 $25,000,000 11